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Sometimes, remarkable gaps are seen on graphics while transacting in Forex market. GAP is occured while no transacting situation in price range.

Gap is occured during no transaction moment in price increment.

As it is seen in the graphic of GAP, we see that order do not execute, that is to say, volume is so low. If we look at reasons of  gap’s  formation, economy, political events, datas which was explained beyond the expectations or oppositely, natural disasters, crises can be said. In this situations, careful investors prefer to enter order in the same direction or opposite direction instead of transacting with current price when volatility slows down. Because of these reasons, gaps are seen in graphics except from graphics, which we have already seen, until opening time of Fx market in Sunday night from closure time of forex market in Friday night.

Session, due date, transaction time allow formation of GAP.

Gap Types:

1: Common Gaps:

Common gaps are price jump in normal market conditions. Generally, common gaps are occured in horizontal market, significance level of common gaps is low. Their effects and interval ,in which does not occur price, lower than other gaps.

2: Breakaway Gaps:

Breakaway gaps occur in the beginnig of the trend movement, and they cannot be filled again. It necessary to make a good analysis. Moving in the same direction begins swiftly. Because of that, magnitude of price jumpcan give important signals. Gaps are construed according to support and resistance levels by appraising with technical analysis.

3: Runaway Gaps:

Runaway gaps occur in the continuation of breakaway gaps, and they take place in parallel with trend. Runaway gaps give strong signals about continuation of trend. Runaway gaps shows that movements can continue at the same rate by measuiring from previous breakway gaps to current price level. Runaway gaps are important in terms of usage and construal.

4: Exhaustion Gaps:

These gaps occur in the end of trend, and they lead to beginning an opposite movement against the current movement. Prices, which return to sales with changing direction of trend, make closure of Gap by seeing during  the last purchase transaction for upward trend. there are a lot of transaction amounts in exhaustion gaps.

5: Island Reversals:

Island reversals give signals about end of continuing trend, and trend move towards reverse direction in island reversals after price jumps. Island reversals remind of an island, because they create gaps in begining of the trend and point in which it returns. That’s why they are named as island reversals.

Island reversals product reliable and clear signals. So, island reversals are succesful signals. Island reversals can product signals in direction of decline like in the direction of increase.

 

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